Weekly Macro Themes - Stocks/bonds ratio turns bearish amid recession risks
This week I covered the following topics/ideas:
1. Weighing Recession Risk: The US economy faces a high chance of recession this year.
2. Stocks vs Bonds: The stock/bond ratio is rolling over as recession risk weighs and momentum shifts from bullish to bearish; relative value and positioning support further follow-through to the downside.
3. Credit Spreads: Credit spreads are catching up (/waking up) to equity market volatility, and may well see further upside; particularly in event of recession (remain cautious on credit spreads/risk assets).
4. US Dollar: Remain bearish US dollar on recession/political risk, deteriorating technicals, longer-term cycles, expensive valuations; and see credible chance of larger breakdown.
5. Global vs US: Bullish global vs US equities given the prospect of a weaker dollar, US recession, flows reversal, and extreme cheap relative (and attractive absolute) valuations for global ex-US equities.
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